Over 900 restaurants log out of Swiggy’s Dineout platform

Credit: VCCircle

Around 900 restaurants, including several private equity backed chains, have delisted from Swiggy’s table booking platform Dineout, citing a revenue drag from high commissions and deep discounts. 

Restaurants that have walked out of their agreements with Dineout include Mamagoto-parent Azure Hospitality, Wow! Momo, Impresario Entertainment & Hospitality Pvt Ltd owned Social and Smoke House Deli, and Beer Café.

The restaurant chains, largely in the casual dining space, say that Dineout’s heavy discounts and cashbacks on in-restaurant dining services further hurts the already battered restaurant industry. 

A majority of these businesses are members of the National Restaurant Association of India (NRAI). 

"We do not understand what problem the company is looking to solve for anymore. There has to be a purpose for giving discounts. Customers are aware of our restaurants anyway and enjoy the dinning out experience Once they have finished, they start looking for deals on these platforms to get discounts," said Riyaaz Amlani, CEO of L Catterton Asia-backed Impresario. 

Amlani added that Impresario was also not on Zomato Pay's product, that allows customers to seek discounts on dining out.  

"This is not a restaurant friendly practice. Swiggy's delivery business has plateaued and now they're trying to find new ways to eat into the dining out business," he said. 

For over a year, the restaurant industry has been struggling because of covid-related restrictions and rising costs due to food inflation. 

The move comes a month after the industry body, NRAI, had cautioned its partner-members against programs being offered by Swiggy and Zomato that offer promotions on dine out orders.  

In a notification issued in September, the restaurant body had said that these programs can impact the overall restaurant ecosystem in the long run. “Both Zomato and Swiggy have built a payment gateway -- Zomato Pay and Swiggy Dineout -- which incentivises our customers to use their payment gateways by discounting, offering 100% cash backs and bank offers and urge partner restaurants to adopt this payment gateway under the unsubstantiated promise of more footfalls,“ NRAI had said then. 

A Swiggy spokesperson said Swiggy Dineout works with about 15,000 restaurant partners on the platform in about 20 cities and engages with them to improve its offering and make this partnership viable for everyone.  

“Restaurant partners on the platform have complete liberty to decide on how much discount they wish to offer to customers through their listing on the app. Thousands of partners continue to join us each month and list on Swiggy Dineout and only a handful of restaurant partners have expressed their desire to delist from the platform (No penalty for delisting). We continue to engage with restaurant partners and NRAI representatives to revisit their choices,” a Swiggy spokesperson said. 

Aggregators are chasing growth by expanding their dining out business, as footfalls in restaurants have bounced back. In May this year, the SoftBank-backed aggregator acquired Times Internet-owned table booking platform Dineout in a deal which was said to be valued around $150 million. 

“Both these products (Dineout and Zomato Pay) are based on heavy discounting. It’s all to do with a 10-40% discount and sometimes a 100% cashback. This is the same culture which they built in delivery, now they’re bringing it to dining out. They will basically take away all our margins which are there,” said Pranav Rungta, chapter head, Mumbai for the NRAI.  

Restaurants are also concerned about the payment features embedded within the aggregator app that diners can use to make payments. “They encourage customers to pay via their app, and charge restaurant partners a 3-5% commission on that. As a result we have to pay higher commissions on the payment and the payment cycle gets elongated,” he said.  

“Our stand is clear: we don’t need discounts for restaurant discovery. The end game is to talk to both the platforms and come up with a program which is acceptable to the industry, which doesn’t make us burn money. We cannot change someone’s business plan; Swiggy has paid a big amount of money to acquire Dineout. All we are saying is do it in a way that’s acceptable; link it to reservations, don’t let discounts dictate it,” he said. 

But not all companies are unhappy with the programme. The marketing manager of a hotel chain said that the company gets about 150 covers a month using the table booking app at a nominal fee. “Restaurants pay a commission of between 4.5-5% on the platform which isn’t much to drive traffic to our restaurants which may or may not otherwise get business, seeing the competition out there,” the person said.